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1995 Supreme(AP) 224
Andhra Pradesh High Court
Judges : K.S.SHRIVASTAVA
Krishnaveni Constructions - Appellant
Versus
Executive Engineer, Panchayat Raj, Darsi - Respondent
Decided On : 04-20-95
A tenderer can withdraw its tender before acceptance if the prohibition clause against withdrawal is not supported by any consideration.
Headnote:
TENDER - WITHDRAWAL OF TENDER - FORFEITURE OF EARNEST MONEY - TENDERER CAN WITHDRAW TENDER BEFORE ACCEPTANCE - PROHIBITION CLAUSE AGAINST WITHDRAWAL HAS NO FORCE OF LAW IF THERE IS NO CONSIDERATION TO BIND THE OFFERER DOWN TO THE CONDITION.
Fact of the Case:
The petitioner, a tenderer, submitted a tender for the construction of a summer storage tank. Along with the tender, the petitioner deposited a term deposit receipt as earnest money. The tender was opened in the presence of the petitioner's partner, and the petitioner's tender was the lowest. However, the petitioner submitted a letter to the respondents requesting them not to consider its tender on the ground that it was misguided by the standard schedule of rates. The respondents forfeited the earnest money deposited by the petitioner.
Finding of the Court:
The court held that the petitioner was entitled to withdraw its offer before it was accepted by the respondents because it was not a concluded contract. The court relied on the principle that an offer made containing a promise not to revoke it and keep it open does not prevent the offerer from revoking the offer, for normally such a promise is unsupported by any consideration.
Issues: Whether the petitioner was entitled to withdraw its tender before it was accepted by the respondents.
Ratio Decidendi: The court held that the prohibition clause against withdrawal has no force of law if there is no consideration to bind the offerer down to the condition. The court also held that the clause of forfeiture is unenforceable because the promise to keep the offer open till the stipulated period was not supported by any consideration.
Final Decision: The court allowed the writ petition, quashed the letter dated 15-7-1993 and the order of forfeiture of respondents Nos. 1 to 4, and directed the respondents Nos. 1 to 4 to refund the amount of Rupees 1,12,800/- (Rupees one lakh twelve thousand and eight hundred only with interest @ 12% p. a. to the petitioner-firm from the date of institution of the writ petition, that is to say, 26-7-1993, till the payment or recovery.
( 1 ) THE petitioner in this writ petition challenges the letter issued by the 1st respondent on 15-7-1993, by which the 1st respondent forfeited and recovered a sum of Rs. 1,12,800. 00 of the petitioner-firm, which had been deposited by it as earnest money with the 5th respondent-Bank. The petitioner also prays for the refund of Rupees 1,12,800/- with interest.
( 2 ) IN answer to the tender notice issued by the 1st respondent on 1-2-1993, the petitioner-firm submitted its tender on 17-3-1993 for construction of a summer storage tank at Darsi, a segment of Comprehensive Protected Water Supply Scheme to Kanigiri and 18 other villages. The estimated value of the summer storage tank was Rs. 80,00,000. 00. The petitioner-firm, along with its tender, deposited a term deposit receipt No. 372206 for Rs. 1,12,800. 00 towards the earnest money deposit. In presence of the partner of the petitioner-firm the tender was opened at 4. 15 p. m. The tender of the petitioner-firm was the lowest. The petitioner-firm at about 6. 30 p. m. , submitted a letter to the 1st respondent requesting therein not to consider its tender on the ground that it was misguided by the standard schedule of rates and the statement itself was not clear.
( 3 ) THE relevant clause of tender reads as follows:"the tender document envisages the tenders received will be decided within a period of three months after the expiry of the last date prescribed for the receipt of tenders and the decision regarding the disposals of the tenders will be indicated at any time within the said period. During the above mentioned period no plea by the tenderer or any sort of modifications of the tender based upon or arising out of any alleged misunderstanding or misconception Or mistake or for any reason will be entertained. In consideration of the Executive Engineer/superintending Engineer, Chief Engineer undertaking to investigate and to take into account each tender and in consideration of the work thereby involved all earnest monies deposited by the tenderer will be forfeited to the Government in the event of such tenderer either modifying or withdrawing his tender at his instance within the said period of three months. "
( 4 ) THE only point urged by the learned Counsel of the petitioner-firm is that in spite of the provision made in the relevant clause of tender in question that the tender received will be decided within a period of three months, after expiry of the last date prescribed for the receipt of tenders, and the decision regarding the disposal of the tenders will be indicated at any time within that period and in the event of such tenderer either modifying or withdrawing his tender at his instance within the period of three months the earnest money is forfeited, the petitioner-firm is entitled to with-draw its offer before it was accepted by respondents Nos. 1 to 4 because it was not a concluded contract.
( 5 ) RELYING on Champalal v. Ghansham-das, AIR 1922 Mad 486, it has been held in Somasundaram Pillai v. Prov. Govt. AIR 1947 Mad 366 as follows:"to have an enforceable contract there must be an offer and an unconditional acceptance. A person who makes an offer has the right of withdrawing it before acceptance, in the absence of a condition to the contrary supported by consideration. The fact that there has been a provisional acceptance makes no difference. A provisional acceptance cannot in itself make a binding contract. There must be a definite acceptance or the fulfillment of the condition on which a provisional acceptance is based. "
( 6 ) IT has been further held in this case that the prohibition clause against withdrawal has no force of law if there is no consideration to bind the offerer down to the condition.
( 7 ) QUOTING with approval the case of Somasundaram Pillai v. Prov. Govt. , AIR 1947 Mad 366 (supra), it has been held in Rghunandhan v. State of Hyderabad, AIR 1963 AP 110 as follows:"it is a well established principle of law that only wh
